Debit Doctors, Inc., provides accounting advice over the Internet. In recent years the company has experienced severe financial difficulty. Its accountant prepares adjusting entries on a monthly basis and closing entries on an annual basis at December 31. An adjusted trial balance dated December 31, 2011, follows.

Instructions

a. Prepare an income statement and statement of retained earnings for the year ended December 31, 2011. Also prepare the company’s balance sheet dated December 31, 2011.

b. Prepare the necessary year-end closing entries.

c. Prepare an after-closing trial balance.

d. Using the financial statements prepared in part a, briefly evaluate the company’s performance.

e. Identify information that the company is apt to disclose in the notes that accompany the financial statements prepared in parta.

DEBIT DOCTORS, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Debits Credits Cash Accounts receivable Unexpired insurance Prepaid rent Supplies S 450 220 1,600 1,800 900 10,000 $ 6,600 7,100 24,000 2,100 170 600 4,000 2,000 56,700 Accumulated depreciation: furniture and fixtures Accounts payable. . . .- . Salaries payable Interest payable... . Unearned client revenue . . --. . Capital stock. -. Insurance expense Office rent expense . . a. . Supplies expense Salary expense. . . . Depreciation expense: furniture and fixtures Office and telephone expense . 6,200 12,000 300 48,000 1,200 4,600 7,200 1,800 2,700 4,300 . Interest expense Miscellaneous expense... $103,270 $103,270